Myth: The federal government made a misleading request to states
to cover their procurement under free trade agreements (FTAs).

• In September 2003, the U.S. Trade Representative sent letters to
all Governors asking whether their state governments would permit the coverage of some
state government procurement under FTAs that were and are being negotiated by the
United States.

• Thirty-seven U.S. states had
agreed voluntarily in the early 1990s to cover some of their state procurement under the WTO Agreement on Government Procurement (WTO
GPA). This allowed suppliers from the other 27 countries that are Party to
the GPA to have an equal opportunity to compete for purchases in those
states.

o These states volunteered to cover
their procurement because they understood that U.S. procurement agreements help U.S. workers and firms by
requiring foreign governments to use the type of open, transparent and
non-discriminatory purchasing procedures routinely applied by the states

• Last September, USTR asked if
those 37 states would be willing to extend to new FTA partners the same opportunities they currently extend to the 27
GPA signatory countries.

• USTR also asked the 13 states
that are not covered by the WTO GPA whether they were willing to have their procurement covered under the WTO GPA, as
well as under the free trade agreements under negotiation.

Myth: Local and municipal governments will be swept in by any
state agreement to be covered in these agreements.

• False. Coverage of a state’s
procurement in an FTA does NOT affect the procurement of any city or county government in that state. USTR has not asked any
cities or counties to cover their procurement under these trade agreements.

Myth: Covering procurement under FTAs would force states to comply
with "draconian constraints" on domestic purchasing policies and undermine state
authority to make purchasing policies, including promotion of local
development.

• False. State governments can decide
the extent to which a state’s government procurement would be covered under the FTAs. It is up to the states to
designate the agencies they want to cover, and to identify any goods or services they want to
exempt.

• For example, when the 37 states
signed on to the WTO GPA, many reserved a number of sensitive procurement areas such as motor vehicles,
construction-grade steel, printing, and construction services. The same reservations these states chose to
take in the 1990s could be taken under FTAs.

• If any new states choose to sign on
to the procurement agreements, they would also be able to decide whether they want to reserve any sensitive procurement
areas, such as measures to promote local economic development.

• Preference programs for small businesses, distressed areas,
minorities and women are excluded from the agreements.

• Moreover, the procurement
agreements set very high thresholds for coverage of state government procurement. For goods and services, only contracts
above $477,000, and for construction services, only contracts above $6.7 million would be
subject to the agreements.

Myth: USTR is seeking blanket authority to cover state procurement
under trade agreements.

• In its letter to state governments,
USTR listed several agreements that were then under negotiation for which state participation was sought (bilateral
free trade agreements with Australia, Central America, and Morocco). Several agreements still
under negotiation were also listed (the Free Trade Area of the Americas and a free trade
agreement with the Southern African Customs Union). It is up to each state to
decide:

o Whether to
participate.

o Which agreements to participate
in.

o The level of its specific
commitment.

Myth: FTAs would undermine green procurement policies of state
governments.

• False. The trade agreements
ensure that state officials can make purchases that protect the environment. The agreements explicitly permit states to make
purchases in accordance with their own state environmental policies.

Myth: The WTO Government Procurement Agreement’s "track record
includes the demise of states' procurement policies aimed at avoiding business with
the Burmese dictatorship."

• Wrong. In June 2000, the U.S.
Supreme Court unanimously struck down under the Supremacy Clause of the US Constitution a Massachusetts state law
that effectively barred companies doing business with Myanmar (formerly Burma) from doing
any business with the state. The WTO never ruled on the Massachusetts Burma
case.

Myth: FTAs would put "at risk" preference programs and other local
development policies.

• False. When states sign on to the
FTAs, they may exclude sensitive local programs, as many states have (as noted above).

• Also, the thresholds for the
application of the FTAs to state procurement are very high: $477,000 for purchases of goods and services and $6.7 million for
construction contracts.

Myth: States would not receive any benefits by participating in
the trade agreements.

• False. Including state procurement
in FTAs allows U.S. businesses comparable access in the state or other sub-central procurement markets of trading
partners. Moreover, opening state procurement to a wider list of potential bidders can result
in lower prices and more choices for state government agencies, thus saving taxpayer
dollars.

• By voluntarily covering their
procurement, states strengthen USTR’s leverage to persuade foreign countries to open their state or other sub-central
procurement markets to U.S. suppliers. For example, in the negotiations for an FTA, Australia
had been unwilling to cover its states and territories unless the United States covers a
significant number of states. Nondiscriminatory access to the procurement of Australian states and territories is
a high priority for U.S. suppliers of goods and services.